Trying To Understand A Homeowner's Situation
Say a homeowner has 30K equity in a home valued at 100K. Foreclosure happens, unredeemed.
Question:
Will the homeowner receive the 70K back from the bank? And when? Or does the homeowner walk away with absolutely nothing because he no longer owns the home?
I'm sure you meant to ask if the $30K in equity is returnable to the former homeowner.
First, the judgment amount is paid, plus applicable fees and costs of sale (some jurisdictions permit a commission payable to, for example, the Sheriff). Then all other lienholders are paid from remaining proceeds.
If there are any remaining proceeds after everyone has been paid, the former homeowner may be entitled to request the return of the proceeds. In NJ, excess proceeds are deposited to the State, then the former homeowner must request, in writing, the proceeds. The process could take 30 days or more. Frankly, I'm not sure how long it takes because it happens so infrequently.
Since foreclosure laws and customs can vary from state to state and even from county to county...contact the Selling authority (Sheriff, Trustee, referee) and ask about excess proceeds.
I'm a bit confused here. I'm referring to a foreclosure where the bank takes ownership of the property.
So you're saying, once the bank sells and pays off all liens, the homeowner may be entitled to the remainder of proceeds from the equity (or a percentage of).
Do homeowners often get these proceeds, or do they normally walk away with nothing?
It seems more logical to me that the homeowner should receive (from the sale of the property) all that they''ve paid into the property (principle payments) but that the equity is forfeited & relinquished due to foreclosure.
Anyone understand what I'm saying here?
Bottomline: is the homeowner guaranteed monetary payment after foreclosure?
And please describe to me what kind of monetary payment a homeowner is guaranteed after foreclosure. What will they receive back?
Thank you much.
There is no guarantee to the homeowner that they will get anything.
The property is auctioned off and it may or may not sell at market value. The bank will bid to protect their intererest in the property.
The bank is allowed to bid for their full amount owed including principal, deliquent interest, attorney fees, escrow advance fees, etc, etc. There will be TONS of fees added. Oftentimes the bank will get the property back and sell it themselves as a foreclosure.
It is also likley that the property will not sell for $100k. The bank doesn't care about selling it for that. Asuming that they only have $70k into it that is all they want out of it.
Whatever is left over will likley go back to the homeowner. I can't imagine a homeowner getting anything but if they do it won't be much.
What you can do---buy that $100k property from the homeowner for $70k and flip it.
Hope this helps....GOOD LUCK
Thanks, both of you.
I was simply trying to find out if the homeowner would be losing everything in foreclosure. It seems that the answer is yes . . . that means this hoemowner is better off accepting 50K than going through foreclosure where he ends up with nothing. Am I right?
You're trying to make it more complicated than it really is. The only consideration that matters is the liens on the property and how much it sold for at auction. The proceeds from the auction go to pay the foreclosing lien and all those below it. The owner is at the bottom of the list so if there are excess proceeds after the foreclosing and junior liens are paid then it would go to the previous owner. Any senior liens stay on the property so the buyer at auction takes ownership in the property subject-to those liens.
Now if the foreclosing lender is the 1st in line then they own the property free and clear and all junior liens are wiped off the property.
Here's an example:
FMV: $100K
Auction Price: $80K distributed as...
1st: $70K
Owner: $10K + devasted credit + eviction if they don't leave.
Now in your example of giving them $50K only works if you buy it subject-to which means you would pay $x resinstatement costs + $70K loan balance + $50K cash on a $100K house, that deal sucks. Better to offer them $5K in cash to walk away with salvagable credit, you reinstate the loan, and continue making the payments. Either sell the house all or mostly cash, refiance, or rent or lease/option it.
Radio 52, Are you saying that there's no way I can buy a house from an owner below "balance due" prior to foreclosure or preforeclosure? (unless I buy it at the auction or short sale, etc.)
I think I just asked a similar question on my other thread. Please ignore my redundacy. I normally have to hear things a few times in a number of differnt ways to get a clear picture.
Thanks.
Excuse me, I understand that the auction and short sale are not prior to preforeclosure & foreclosure.
Lightbulb!!!
So one always thinks of paying the homeowner or purchasing from the homeowner based on the equity one will have after purchasing the home. And the homeowner is better off with 5k than nothing at all.
Thanks, Radio 52!